Other things held constant, if the expected inflation rate DECREASES, and investors also become MORE risk averse, the Security Market Line would shift in<u> have a steeper slope </u>manner.
<h3>What is the Security Market Line (SML)?</h3>
The security market line (SML) is the Capital Asset Pricing Model (CAPM). It gives the market’s expected return at different levels of systematic or market risk. It is also called the ‘characteristic line’ where the x-axis represents the asset’s beta or risk, and the y-axis represents the expected return.
<u>Security Market Line Equation</u>
The Equation is as follows:
SML: E(Ri) = Rf + βi [E(RM) – Rf]
In the above security market line formula:
- E(Ri) is the expected return on the security.
- Rf is the risk-free rate and represents the y-intercept of the SML.
- βi is a non-diversifiable or systematic risk. It is the most crucial factor in SML. We will discuss this in detail in this article.
- E(RM) is expected to return on market portfolio M.
- E(RM) – Rf is known as Market Risk Premium.
<u>Characteristics of the Security Market Line (SML) are as below:</u>
- SML is a good representation of investment opportunity cost, which combines the risk-free asset and the market portfolio.
- Zero-beta security or zero-beta portfolio has an expected return on the portfolio, which is equal to the risk-free rate.
- The slope of the Security Market Line is determined by the market risk premium, which is: (E(RM) – Rf). Higher the market risk premium steeper the slope and vice-versa
- All the assets which are correctly priced are represented on SML.
- The assets above the SML are undervalued as they give a higher expected return for a given amount of risk.
- The assets below the SML are overvalued as they have lower expected returns for the same amount of risk.
Therefore, we can conclude that the correct option is A.
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ANSWER:
Well I dont know but he did say that wars were harmful even for the winner
The brown tree snake is actually really infamous for being an invasive species so C would be the answer.
The religions had no changed by influence of each other. The only thing i could think of is that the Russian orthodox put the onion shaped domes on top of their churches based off of the Turkish design.
In the United States, poverty is currently most prevalent among young children.
The poverty rate is said to be approximately two times higher for African-Americans, Native Americans, and Hispanics than it is for Whites and Asian-Americans. So, a child here is most likely to live in poverty because young children here are especially at risk for poverty.
However, the poverty rate for the population as a whole is 11.6% and the rate also varies greatly by the race. Whereas, the Blacks have the highest poverty rate at 19.5%. Thus, the infants and toddlers represent the age group which is most likely to live in poverty.
Hence, option A is correct.
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